According to recent reports, China’s economy is grappling with a weak domestic demand and low consumer spending. A commonly expressed sentiment is that “people have money but are afraid to spend,” yet research indicates that the average citizen does not have a significant amount of disposable income.
Economic analysts widely observe four major disparities manifesting in China’s economy. Firstly, production sectors are relatively robust, while demand is weak. This contrast is particularly evident in the comparison between external demand, which remains notably resilient, and sluggish internal demand coupled with ongoing pressure on consumer spending. Moreover, emerging industries are witnessing higher growth rates, while traditional real estate across the entire chain of production and services is underperforming. Compounding these issues is the fact that despite the stronger outward economic orientation of first-tier cities, their own consumer growth has shown signs of weakness, leading to a marked divergence from lower-tier cities.
Since the property market bubble burst in 2021, the continued lack of vitality in domestic demand and consumer expenditure has become a growing concern for China’s economic outlook. An increasing number of analysts have begun comparing China’s situation to Japan’s prolonged period of economic stagnation, with many economic authorities believing that China may be on a path reminiscent of the “lost decades” experienced by Japan.
On November 11, the People’s Bank of China released its third-quarter monetary policy implementation report, which acknowledged the ongoing challenges of strong supply but weak demand, structural disparities, and external shocks affecting the economy.
Notably, the monetary policy report revealed changes in the banking deposit structure, demonstrating three key trends.
Firstly, corporate deposits, including fiscal deposits, accounted for a relatively high proportion, standing at 49.8% at the end of the third quarter of 2026. This figure exceeds similar metrics in economies like the United States and Japan, largely influenced by deposits from institutional entities and non-banking financial institutions.
Secondly, deposits in non-banking financial institutions have seen significant growth, rising by 19.1% year-on-year by the end of the third quarter of 2026. The share of these deposits in the total deposit category also increased from 9% at the end of 2023 to 11.2% by the same period in 2026.
Thirdly, both household and corporate deposits have begun to exhibit an increasing trend towards fixed-term deposits. The proportion of the corporate current deposits declined from 38.4% at the end of 2020 to 27.9% at the end of the third quarter of 2026. Similarly, the share of household current deposits dropped from 35.3% in 2020 to 25.4% in the same quarter of 2026.
In developed economies in Europe and North America, deposits often fulfill transactional roles, resulting in a higher ratio of current deposits. In contrast, China’s banking system shows a pronounced bias towards fixed-term deposits. Several factors contribute to this trend; during periods of low interest rates, individuals are inclined to favor fixed-term deposits for their higher yields. Additionally, businesses, governmental bodies, and non-banking financial institutions also contribute significantly to the accumulation of fixed-term deposits.
The People’s Bank of China’s report suggested that this increasing proportion of fixed-term deposits might reflect the investment and consumption willingness of Chinese enterprises and households.
Recently, the China Finance 40 Forum, a private think tank, released its third-quarter “China Macroeconomic Analysis Report,” which also examined the underlying reasons for the tepid internal demand and sluggish consumer spending in the country.
The report asserts that the average Chinese household does not hold a substantial amount of money. While the total bank deposits have exceeded 170 trillion yuan—an absolute figure greater than those in the United States, Japan, and the Eurozone—this perspective changes when considering various financial assets. Household financial assets should include not only cash and deposits but also investments in securities, pensions, and insurance. When measured in financial assets, the per capita wealth in America is around $357,000, in Japan about $122,000, and in the Eurozone approximately $94,000, while in China, it stands at only $29,000. Despite a high volume of deposits, the scarcity of securities, pensions, and insurance assets suggests that financial resources are not abundant when viewed holistically.
Furthermore, the report analyzed disposable income levels, noting a significant decline in the consumer propensity during the pandemic. Post-pandemic, the amount spent on consumption has remained stable, averaging between 63 to 64 yuan out of every 100 yuan of disposable income. Given that both the distribution pattern and consumption preferences have remained relatively unchanged, the deceleration in nominal GDP growth has directly resulted in a slowing rate of increase in disposable incomes, which is the primary reason for the drop in consumption growth.
This decline should not be interpreted solely as a reluctance to spend; rather, it is fundamentally driven by changes at the income level. Factors such as structural disparities in the economy and slowing growth rates directly affect the growth of residents’ disposable income, which in turn impedes the potential for increased consumer expenditure.